Finding a plan cheaper than the employer’s plan

At my job, I have to pay $600 a month out of my paycheck for my family’s health insurance. That seems like a lot. The plan is decent, but I’m wondering if I could get a similar plan on my own and pay less. What do you think?

Squeezing Every Nickel

Dear Squeezing Every Nickel,

I sincerely doubt that you would pay less on your own for a plan that would be similar to your employer’s plan. The reason is your employer buys what is called a “group plan” (or “small group plan” if there are fewer than 50 employees). The insurance carrier knows that most employees and families will join the group plan; in fact, if less than a certain percentage of employees join, the carrier can adjust the cost. The carrier can, therefore, set the plan cost knowing that it will have some sick people and some healthy people. In the end, it will balance out and the carrier will make some profit.

The same is not true for plans that you buy on your own. These are called “individual” or “non-group” plans. The carrier knows that people who buy these plans are more likely to need medical care. Therefore, the rates for individual plans count on more sick people and are higher – a great deal higher.

Young people, say under age 40, may be able to find an individual plan that costs less than their employer’s plan. However, they are unlikely to find a plan that has the same features, co-pays, and deductibles as their employer’s plan. Group plans, overall, have more generous benefits than individual plans.

So you can take a look at other plans, but you may not find a better deal — at least not this year. In 2014, if federal health reform survives the Supreme Court decision, the market for non-group/individual plans may be very different. When almost everyone is required to have health insurance, there will be more people buying non-group plans. The insurer’s assumption about getting more sick people in these plans will change, and rates may go down.